"The tightening policy is creating a lot of difficulties for local governments trying to repay debt, and is causing defaults," he told a meeting at the World Economic Forum in Dalian. "Our version of subprime in the US is lending to local authorities and the government is taking this very seriously."

"Everybody assumes that they will be bailed out by the central government if they default, but I disagree with this. It means that the people will ultimately pay the bill for it all, at a cost to the broader welfare. Those who are not highly indebted are forced to help those who are," he said, echoing the debate over moral hazard that has divided opinion in the West since the banking rescues.

Local governments have created more than 6,000 arms-length companies to circumvent restrictions on bond issuance, creating a huge patronage machine for party bosses that has largely escaped central control. The audit office said the loans have reached $1.7 trillion (1 trillion pounds). While some of the money has been used to finance much-needed investments in water systems and roads, a large part has fuelled unbridled construction with a dubious rate of return.

The local governments depend on land sales for 40 per cent of their revenue so the process has become incestuous and self-feeding. Such reliance on property sales revenues has greatly aggravated the post-bubble crisis in Ireland.

Its central warning - that ETFs are not the cheap and transparent vehicles the marketers would have us believe - was spot on. When UBS's $2 billion black hole hit the screens on Thursday, no one who read the FSB report was surprised to see the words ETF and rogue trader in the same sentence.

The past ten years have seen an explosion in the popularity of ETFs. In part this reflects some of their acknowledged benefits - relatively low costs and the ability for investors to trade them throughout the day. A third claim, that ETFs are simple products, may once have been true but it no longer holds water. Many of these funds are now fiendishly complicated and way beyond the comprehension of the individual investors and professionals alike who are buying them.

Like many financial innovations - most obviously, the alphabet soup of mortgage-related debt obligations that triggered the financial crisis - ETFs started out as a good idea, and for some investors, in their most transparent form, they remain so. But, as so often in the financial services industry, a tangled web of complexity has rapidly developed. What was once a straight-forward means of gaining access to a market has turned into a minefield for investors and one which, as UBS discovered in the middle of the night last week, has the potential to become the next toxic scandal.

"That's what happened in Cairo. That's what happened in Madrid. You don't want those kinds of riots here." Actually, what happened in Cairo was that angry Egyptians took out their frustrations with the ruling junta by attacking the Israeli embassy. As for Madrid, the most recent street protests were sparked by widespread unhappiness that the Spanish government was spending millions on the visit of Pope Benedict instead of dealing with widespread unemployment.

Bloomberg's unusually alarmist pronouncement came as President Obama has been pressuring reluctant Republicans to pass his proposed job creation plan. "The damage to a generation that can't find jobs will go on for many, many years," the normally-measured mayor said. Bloomberg gave Obama kudos for coming up with a jobs plan.

"At least he's got some ideas on the table, whether you like those or not," he said. "Now everybody's got to sit down and say we're actually gonna do something and you have to do something on both the revenue and the expense side." And everybody's got to share in the pain.

WND previously reported how the US section of the protest, complete with a planned tent city in downtown Manhattan, is closely tied to the founders of ACORN and leaders of major US unions, including the Service Employees International Union, or SEIU. While protest leaders claim they are non-violent, there are indications the protesters are training to incite violence, resist arrest and disrupt the legal system.

The protest aims to take root nationwide. Activists are advertising on social network sites such as Facebook and Twitter for a "Day of Rage" on September 17 to begin with the "occupation" of Wall Street and continue with protests across the nation. Planners have their own website - USDayofRage.org - which tells protesters to "bring your own tent."

The website is not specific about the purpose of the "Day of Rage" other than calling for "integrity" to be "restored to our elections." The site accuses corporations of using "money to act as the voices of millions, while individual citizens, the legitimate voters, are silenced and demoralized by the farce." Advertisements claim the protests at Wall Street and nationwide will be "non-violent." However, the official website provides resources, including videos and detailed written instructions, for protesters to engage in "civil disobedience."

The resources provided include instructions on how to resist police arrest and disrupt court hearings. This week, the 'Day of Rage' twitter feed posted links to what it called "nonviolent civil disobedience training talks." Similar instructions are provided on the website of an affiliated organization, which calls itself "Occupy Wall Street" and is also involved in planning the September 17 protests.

It began as follows: "Thank you for your letter to the Prime Minister about concerns you have regarding the European Union. I apologise for the delay in our response. Where relevant, letters are delegated to officials for a response. Therefore your letter has been forwarded to the Europe Directorate of the Foreign and Commonwealth Office for a reply."

"Like you, many British people feel disconnected with how the EU has developed and about the decisions that have been taken in their name. The Government believes that membership of the EU is in the national interest of the UK. We champion vigorously the interests of the UK and play an active role within the EU. We also believe that the EU needs to change and can improve, and we are confident in the UK's ability to move the EU in the right direction. For this reason, there will not be a referendum on this issue."

Well, ten out of ten for honesty. We're against a referendum because we'd, you know, lose it. The FCO functionary artlessly admits what elected ministers dare not: Britain would vote to leave the EU.

Dramatically heightening tensions during an increasingly volatile time in Israel's relations with the Arab world, Essam Sharaf's suggestions that the 32-year treaty could be revised prompted disbelief in the Jewish state. "The Camp David agreement is not a sacred thing and is always open to discussion with what would benefit the region and the case of fair peace," Mr Sharaf told Turkish television. "We could make a change if needed."

Coming just days after an angry mob stormed the Israeli embassy in Cairo, Israeli officials said they were staggered more by the timing of Mr Sharaf's comments than their actual content. "Less than a week ago, we had the problem with the embassy," an Israeli official said. "I don't think a responsible prime minister should say things like that." Reeling from a noxious diplomatic row with Turkey and fearing that an expected Palestinian bid for statehood at the UN next week will heighten its growing sense of isolation.

On Thursday, Recep Tayyip Erdogan, the Turkish prime minister, raised the stakes by repeating his intention to deploy warships in the Mediterranean to challenge Israeli "aggression". "Israel cannot do whatever it wants in the eastern Mediterranean," he said. "They will see what our decision will be on this subject. Our navy attack ships can be there at any moment." Israel has spoken of its determination to defuse tensions with Egypt in the wake of last week's embassy raid.

Such "liquidity-providing operations" were last conducted in 2008 and 2009 at the height of the credit crisis, when banks' reluctance to lend to one another threatened to cripple the financial system. The latest developments came on the third anniversary of the collapse of Lehman Brothers, the US bank whose demise brought the financial system to the brink of meltdown.

The central banks' fresh intervention, which will run from October until December, was driven by the deepening crisis in the eurozone, which is struggling to cope with the debts of countries including Greece. George Osborne, the Chancellor, is to admit that Britain is "not immune" to the international crisis, telling The Daily Telegraph Festival of Business that recent events make it all the more important for the Coalition to stick to its deficit-reduction plans.

The eurozone debt crisis has led to growing fears in financial markets about the stability of major European banks, especially those in France. Investors, particularly US money-market funds, are increasingly worried that the European banks are exposed to huge losses on loans they have made in Greece and other indebted eurozone countries.

"The General Assembly is not a place where Israel usually receives a fair hearing," Mr Netanyahu said on Thursday. "But I still decided to tell the truth before anyone who would like to hear it." The Israeli government, which opposes the Palestinian UN bid, had originally considered sending Shimon Peres, the Israeli president, to New York. Mr Peres is widely seen as a less divisive figure on the international stage than the prime minister. However, a failure by Mr Netanyahu to turn up at the UN next week could also have been interpreted as an unnecessary snub to the UN at a time when Israel is already facing growing diplomatic isolation.

The announcement suggests that the Israeli government now has little faith in the last-ditch effort by US and European negotiators to stop the Palestinian drive for statehood at the UN. According to several officials and diplomats, Mr Abbas on Wednesday rebuffed an alternative "package" that was drafted and presented by Tony Blair, the international community's Middle East envoy.

Mr Abbas is still facing strong pressure from senior US officials to step back from the UN move. However, most officials and diplomats believe that there is now little chance of stopping a Palestinian bid for statehood, which could take place either at the UN Security Council or in the UN General Assembly. Mr Abbas himself is scheduled to give a television address on Friday night, amid speculation that he will use the broadcast to finally reveal the precise Palestinian proposal for statehood at the UN.

Speaking ahead of a highly anticipated meeting of IMF, US and European finance officials in Poland, Ms Lagarde said Athens had to re-ignite "the urge to deliver on commitments" made by its government after a period during which "momentum had slowed down".

"If there has been no implementation, we don't pay," she told CNBC, in describing the IMF's lending practices. Ms Lagarde's comments differ from the views of the IMF's partner in the Greek bail-out negotiations, the European Commission, which EU officials said is largely satisfied with Greece's recent concessions. These include a property tax that is expected to raise about 2 billion euros this year to fill a 1.7 billion euros gap in the budget.

The eurozone's finance ministers are expected to decide today whether Greece's latest concessions are adequate. The move would give political cover to resume negotiations with Athens over the 8 billion euros aid Greece needs to meet government payrolls.

But officials said some European states, particularly Germany and the Netherlands, remain sceptical of the new Greek commitments and want to review details of the proposals, as well as their revenue assumptions. "Once we have the numbers based on the technical work we'll see how much they've filled the gap," said one senior European official. "At least three-quarters of the gap should be filled for us to send the [negotiators] back."

Some of them are even from nursery schools where children are no older than three. One youngster was accused of being racist for calling a boy 'broccoli head' and another was said to be homophobic for telling a teacher 'this work is gay'.

Two primary school children were reported for homophobia after quarrelling over a rubber and calling each other 'gay' and 'lesbian'. Those youngsters reported for petty offences at nursery classes included four in the London borough of Tower Hamlets and three in Hertfordshire.

Schools are forced to report the language to education authorities, which keep a register of incidents. Although the Department for Education recently pledged to cut unnecessary red tape and bureaucracy, it has given no guidance on such 'offences'. In total, 34,000 nursery, primary and secondary pupils were effectively classed as bigots because of anti-bullying rules. The school can keep the pupil's name and 'crime' on file.

The record can be passed from primaries to secondaries or when a pupil moves between schools. And if schools are asked for a pupil reference by a future employer or a university, the record could be used as the basis for it, meaning the pettiest of incidents has the potential to blight a child for life.

Figures for the year 2009-10 were obtained under the Freedom of Information Act by the civil liberties group the Manifesto Club. Adrian Hart, of the Manifesto Club, called for the Government to roll back the policy of hate speech reporting in schools. He said: 'Children need space to play and to learn the meaning of words, without being reported to the local education authority. These policies are an inappropriate intervention into playground life, and undermine teachers' ability to set a moral example to children and to teach them right from wrong.'

They say Friday penance will be "a clear and distinctive mark" of Catholic identity and an act of common worship. A resolution issued in May said penance would begin on 16 September to mark the first anniversary of the Pope's UK visit. In a statement issued earlier this month, the bishops said it was important that followers of the Church were united in a common, identifiable act of Friday penance because "the virtue of penitence is best acquired as part of a common resolve and common witness".

Those who cannot or already choose not to eat meat as part of their daily diet are being asked to abstain from some other food or activity. Those aged under 14, the sick, elderly, pregnant women, seafarers, manual workers or others in situations where there are moral or physical reasons for eating meat are excused from abstaining. The Catholic Church defines meat as the flesh of warm-blooded animals, so eating fish is permitted on Fridays.

The practice of abstaining from meat on Fridays is centuries-old, but in 1985 the Catholic Church in England and Wales allowed Catholics to substitute another form of penance in its place.

Brazilian finance minister Guido Mantega on Tuesday said that the Brics states are to hold a meeting on 22 September to discuss co-ordination of an EU rescue plan."We will meet next week in Washington to decide how to help the European Union to get out of this situation," he said. The nations are considering substantially boosting their holdings of euro-denominated bonds in their foreign exchange reserves. According to Brazilian business daily Valor, the Brics nations are to unveil a plan that would go beyond Europe and look to aid a stabilisation of the wider global economy.

However, the paper also said that the plan would involve investment in only the stronger European economies, such as Germany and the UK. At the same time, the Financial Times has reported that Italy has taken its begging bowl to Beijing, with finance minister Giulio Tremonti meeting with the head of the China Investment Corporation, China's major sovereign wealth fund, to discuss the possibility of the Middle Kingdom purchasing Italian bonds.

Brazil's Mantega for his part did not give additional details of what was being considered. The Brics pow-wow is to take place a day before the wider G20 meeting and ahead of a gathering of the International Monetary fund from 23 to 25 September. What have been regularly referred to as 'emerging economies' have seen their growth outstrip that of the main industrialised nations in recent years. China, the most successful of the group, maintains reserves worth some $3 trillion.

As Brussels' austerity strategy wobbles in the face of faltering growth and soaring unemployment, Europe may have to submit to the ultimate indignity of a rescue from the former subjects of its colonialism.

Britain is drawing up contingency plans for a catastrophic collapse of the euro which experts fear could plunge our economy back into a recession 'beyond comprehension'. Economists believe the EU would be unlikely to survive a disorderly break-up of the euro and say that even stronger economies could contract by as much as 25 per cent in the aftermath.

Amid a mounting sense of inevitability that Greece will default on its massive debts and be forced to leave the single currency, the US urged EU governments to use 'overwhelming force' to address the debt crisis. US treasury secretary Tim Geithner, who will take the unusual step of attending a meeting of EU finance ministers in Poland tomorrow, admitted Washington had been 'behind the curve' in tackling its own financial crisis but urged Europe to act decisively.

Yesterday ratings agency Moody's downgraded the credit ratings of two of France's largest banks, Societe Generale and Credit Agricole, because of their exposure to Greek debt causing panic on French stock markets. The ratings agency left France's largest bank, BNP Paribas, on review, saying its profitability and capital base gave it an adequate cushion to support its Greek, Portuguese and Irish exposure.

Former Liberal Democrat leader Lord Ashdown, a long-time supporter of the single currency, asked in an interview with The Spectator whether he thought the euro could survive in its current form, replied: 'No, I don't.' 'The most likely outcome is probably a core euro, a euro that has Germany, Austria, Finland and the Benelux countries in it - you'd have to have France in there for political reasons, even though economically they wouldn't come up to the mark precisely - and maybe Sweden. Then you have a core euro and you then create the institutions to govern the euro.'

Mr Goodhart, of the London School of Economics, told MPs that while the Bank and the UK Government should have been making contingency plans for a second downturn, in reality there would be little more they could do. "In 2008 the fiscal positions of most governments was considerably stronger than they are now, and interest rates as of the beginning of October 2008 were considerably higher than they are now," he said. He said therefore the policy tools available in better times - including cuts in interest rates - had already been used up.

"You have got the potential for another grave shock with less in the way of Government instruments to offset it and protect communities against it." Addressing the Treasury Select Committee, Mr Goodhart said a severe recession in the eurozone combined with sluggish growth in the US would lead to lower growth in the UK and potentially see it stripped of its triple-A rating.

Andrew Tyrie, chairman of the Treasury Select Committee, said the session, which included evidence from a range of academic and city economists, suggested the current crisis in the eurozone was "political rather than economic". It is clear there is a "need to make absolutely sure that the situation in Spain and Italy is insulated", he said.

Premier Wen Jiabao said his country and will play its part to "prevent the further spread of the sovereign debt crisis," but warned that China will not sign a blank cheque for states that have failed to carry out full reform. "Countries must first put their own houses in order," he told the World Economic Forum in Dalian.

Mr Wen said he had spoken to Jose Manuel Barroso, the president of the European Commission, laying the conditions for Chinese intervention. "I made clear to him that we are confident Europe will overcome its difficulties and make a full recovery. We have on many occasions expressed our readiness to extend a helping hand, and that we are willing to invest more in European countries. At the same time, we need bold steps to give redirection to China's strategic objective. We believe they should recognise China's full market economy status," he said, referring to World Trade Organisation rules. "To show one's sincerity on this issue... is the way a friend treats another friend," he said.

Market status under the WTO has become the Holy Grail for China, both because it makes the country less vulnerable to 'anti-dumping' sanctions from the EU and because it marks the country's final coming of age in the global economy. Beijing is bitter that the EU recognises the market status of Russia despite open violations of WTO rules by the Kremlin, claiming that the "double standard" is a disguised form of protectionism. Under its WTO accesssion accord in 2001, China remains a "non-market economy" for 15 years unless other members agree to fast-track the process. There could still be problems even after 2016 if major powers take a tough line.